The great divide in Britain’s housing wealth – Yalla Match

What is the total value of all homes in the UK? Estimates can vary by the individual trillion or so, depending on who is doing the calculations, but summer property portal Zoopla put the number at £10 trillion.

I think, thanks to rising interest rates and a deepening cost of living crisis, this will be a record – at least when adjusted for inflation.

But forget the most recent key figures – which assume all homes find a buyer at current prices in a very illiquid market – and most tellingly, housing wealth is not evenly distributed. Using the English Housing Survey data – which assumes a much lower lump sum and removes all outstanding mortgages – my colleagues and I calculate that homeowners over 65 collectively own 47 per cent of total home equity. Those under the age of 45 own only 12 percent. No wonder Mom and Dad’s couch was so popular.

Real estate wealth may be one of the most striking intergenerational disparities in housing, but it’s not the only one: Residential space has emerged since the pandemic. At an aggregate level, there are enough bedrooms for every resident of England to have a one-bedroom stock of almost 10 million homes – and that’s before we include 1.1 million empty homes.

The vast majority of these “extra” bedrooms are in homes occupied by older families (over 65 with 7.4 million rooms). Many of the bedrooms will be for children who have now left home, although in some cases they may be converted into home offices or some other use that appeals to those of retirement age – perhaps more gyms than a model railway these days.

It is often suggested that all these extra bedrooms could be used to ease the housing crisis – and the country would surely benefit from a more liquid housing market with houses better spread out. But it is a morally and politically difficult challenge that must be resolved. Understandably, older cohorts are less willing and less likely to move home than younger cohorts.

Bar graph of the proportion of households moving in tax year 2020-2021 by age showing that over 65s are least likely to move house

This trend applies even to renters. More than a third of households over 65 have lived in their current residence for 30 years or more, regardless of tenure. Even motivating people to move out of their family home is fraught with problems before any potential inheritance recipients – or children, if you prefer – are involved in the discussion.

The economics of downsizing are also a challenge. While older people own most of the housing wealth, this partly reflects the size of their generation. Most elderly people actually live in middle-priced homes. Despite owning almost half of all housing stock, the median figure among older homeowners is £322,000 for a family.

With an average flat selling for £295,000 in 2021 and a bungalow for £337,000, there was little financial incentive for people to downsize – even before moving costs were factored in.

However, that may be about to change, thanks to the cost of living crisis.

The country’s aging housing stock and lack of investment have left the UK unprepared for higher energy prices. Around one in five homes in England were built more than 100 years ago, and older homes typically have significantly lower energy efficiency ratings than new homes. More than 80 percent of homes built before 1919 had a low rating (a grade of D or lower) on their energy performance certification, according to the most recent English Housing Survey. Houses built between the two wars – another 15 per cent of total housing – are not much better, with almost three-quarters of them rated low.

Bar chart of average home ownership by age of home owner (£1,000) showing that home owners over 65 have an average of £322,000 in family equity

Older homes are not only associated with lower energy efficiency, but older homes are. About 48 percent of those headed by 16- to 29-year-olds had an energy efficiency rating of D or lower; For those over 65, the percentage rose to 62 percent. While lower-income families and younger families are most exposed to the cost of living crisis due to the lower budget capacity to trim necessities, older families are far from immune due to the poorer energy efficiency of their homes.

Although energy price increases will be frozen this autumn, those in homes with the worst energy efficiency rates will still have to pay more. Next month, the average monthly gas bill in D-rated homes will be 28 percent more expensive than the average C-rated home, according to analysis by the Resolution Foundation – a beautiful home with original features and extra bedrooms can easily become a real burden on rich and low-income retirees. It is not clear whether this is enough to trigger a flood of downsizing, but even if government support eases the pressure, the challenges facing families, regardless of income, wealth or age, could be significant enough to change people’s behaviour. alter.

Bar graph of the proportion of households in the EPC* ranges, by age (%) showing that older people are more likely to live in leaky homes

The investment required is one of the challenges of modernizing and improving the energy efficiency of homes in the UK. Further analysis in the English Housing Survey shows that the majority (95 per cent) of homes rated D that seniors live in could be upgraded to a rating of C. However, the average cost of upgrading their home below this benchmark is estimated at £8,332 . . And that’s just the average: 22 per cent of households will need to spend between £10,000 and £15,000, while another 12 per cent will need to spend £15,000 or more.

Given the costs involved, perhaps it’s time to use up some of that housing equity that older families were lucky enough to build up and reinvest in their homes.

Neil Hudson is a housing market analyst and founder of Bilt Plus Consulting

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